Zimbabwe : Short-Term Srategy

Tunis, Tunisia, 25 May 2009 – The African Development Bank (AfDB) Group Executive Board of Directors today discussed a concept note proposing a short-term strategy for the AfDB to help Zimbabwe address the challenges it faces and to support the country’s re-engagement with the international community. Directors expressed firm support for the strategy and applauded the initiatives taken by the AfDB President and management, noting that the Bank should play a leading role, as it has, indeed, been requested by African countries.

The strategy, which covers the next 19 months to December 2010, is anchored on support to the Inclusive Government (IG) formed in February 2009 on the basis of a Global Political Agreement (GPA) between the parties, and on the implementation of its Short-Term Emergency Recovery Programme (STERP). STERP emphasizes political stability, good governance, social protection, sound macro-economic management and growth. It has eliminated the quasi-fiscal activities of the Reserve Bank of Zimbabwe and introduced cash budgeting, spending only what it receives in revenue.

The objectives of the AfDB strategy are to contribute to improved economic stability, better financial and economic management and accountability, greater private sector and international confidence, as well as the development of key areas such as the rehabilitation of infrastructure and capacity building. The longer-term goal is the revival of strong private sector-led growth, building on Zimbabwe’s resource endowments.

A recent IMF Article 4 mission says an economic recovery will not be possible in Zimbabwe without foreign assistance and private capital. Therefore immediate steps have to be taken to stimulate private sector activity, promote investor confidence, restore protection of property rights, and reduce the cost of doing business.

The Bank will help kick-start financial sector operations, identify specific sectors, especially those covering physical infrastructure development where the Bank can leverage its resources with those of other donors, assist the IG with policy development and implementation, and interface with the international community. The AfDB intends to also provide a quick disbursing and self-liquidating line of credit to the private sector.

The paper takes account of meetings last month between Zimbabwe’s Finance Minister, Tendai Biti and key donors hosted by the AfDB in Tunis, and the Norwegian Government in Washington, D.C. Donors have made it clear that while they have seen some recent progress in Zimbabwe, most will provide only humanitarian support until there has been further progress. That would include progress on areas of governance, in keeping with the commitments the IG has established in the GPA.

Nonetheless, there has been broad support for International Financial Institutions to engage with the IG, and for them to provide technical assistance now. Zimbabwe is in arrears with the IFIs, and shareholders have called on IFIs to produce a coordinated plan of action to clear the arrears. It is agreed that the AfDB should play a role beyond that of simply financing. The strategy therefore situates the AfDB contribution firmly within the context of a broader regional and international effort.The directors welcomed the establishment of an AfDB team in Harare to work closely with the IG and the international community. The strategy puts emphasis on speed and flexibility, and highlights the potential for AfDB’s Fragile State Facility to provide a channel for additional resources. For the AfDB itself, one outcome will be the development of a full Bank Country Strategy Paper based on a medium-term strategy developed by the government and the resumption of normal lending operations.

Interview with AfDB Fragile States Unit (OSFU) Head, Margaret Kilo, on the Board’s adoption of a Short-Term Strategy Concept Note on Zimbabwe.

Question: How does the Bank intend to engage Zimbabwe given the country’s long-drawn governance problems?

Answer: The Bank’s involvement in Zimbabwe is based primarily on the requests received from the Zimbabwean government for technical assistance and advice on the management and rebuilding of the economy, as well as restoring donor confidence in the country’s systems and processes which, for the most part, focus on governance issues. Therefore, the Bank’s involvement in Zimbabwe will not only be financial, but will initially include providing advice and technical support to assist the Inclusive Government move its agenda forward. A major task of the Bank’s extended mission to Zimbabwe and the Bank’s short-term strategy in this regard will be to work with the government to convene and coordinate support from other donors. The Bank is selective and focused in its assistance, and as a matter of principle will seek to leverage its operations by coordinating and co-financing with other partners, including, in particular, Southern African Development Community (SADC) countries. The Bank is currently participating in the preparatory needs assessment mission together with the European Union, the World Bank and the UN, which will map out the needs in all sectors of the economy. In this respect, while participating in all other sectors, the Bank has been given the lead role in the sectors within the infrastructure cluster.